GoIndustry-DoveBid GOI Preliminary Results
GoIndustry-DoveBid (GOI) - Preliminary Results
RNS Number : 9766C
GoIndustry-DoveBid PLC
09 May 2012
GoIndustry-DoveBid plc / Index: AIM / Epic: GOI / Sector: Support Services
9 May 2012
GoIndustry-DoveBid plc ('GoIndustry DoveBid' or 'the Group')
2011 Preliminary results
GoIndustry DoveBid, the AIM quoted global provider of asset management,
disposition and valuations services for industrial and financial clients,
announces its preliminary results for the year ended 31 December 2011.
Overview
GoIndustry-DoveBid plc ("GoIndustry DoveBid", or the "Group") is the global
market leader in the provision of asset management, auction and valuation
services relating to industrial equipment.
The Group delivers innovative solutions that help to value assets accurately,
optimise asset utilisation and reduce costs. The Group combines asset,
industry and market expertise, with eCommerce technology to service the needs
of multinational corporations, financial institutions, insolvency
practitioners, used equipment dealers and asset based lenders around the
world.
Summary results
For the year ended 31 December 2011
2011 2010
£000's £000's
Direct Profit 22,095 27,811
Adjusted* loss before taxation (2,933) 613
Exceptional items (224) (409)
Other charges (837) (893)
Loss before taxation (3,994) (689)
Adjusted* (loss)/earnings per share (31.6p) 9.6p
Adjusted* diluted (loss)/earnings per share (31.6p) 9.6p
Loss per share, basic and fully diluted (42.5p) (3.7p)
* Adjusted loss before tax and adjusted loss per share are before exceptional
charges, amortisation of acquired intangible assets and share based payment
charges.
Chairman's Statement
During the period under review, the Group has continued to make strong
strategic progress on a number of fronts, however we are yet to see the
tangible results of this progress at the Group level. The Group reported a
Direct Profit of £22.1m, which is down 20.6% on the prior year. During 2011
we continued to leverage our global strengths by continuing to focus largely
on multinational corporate accounts that are increasingly focused on
efficiently managing and realising value from both under-utilised and
redundant assets. To this end we were delighted to have signed 21 new
corporate 'forward flow' accounts, bringing the number of clients with repeat
business to 60 at year end. This represents over a 50% growth in the number
of forward flow accounts and includes some of the world's largest companies
from the USA, UK, France, Germany, Sweden and China.
In particular, large corporates understand the need to better manage their
industrial asset base through 'asset recovery' programmes. This allows us to
partner with them on a global basis to help maximise their returns on assets.
Consequently, this affords the Group the opportunity to generate higher margin
repeat business to deliver greater future revenues and earnings visibility.
The Group's global footprint, across twenty countries, and globally accessible
online auction platform, which enables buyers and sellers of industrial
equipment to interact and obtain the best market price for their equipment, is
helping the Group shift from the traditional model of asset disposal. This
global footprint gives GoIndustry-DoveBid a significant competitive advantage
which enables the Group to capture business from global corporations. This
has resulted in GoIndustry DoveBid winning over 80% of the Requests for
Proposal in 2011 from global companies and continuing its extremely strong
retention rate with over 97% of the Group's key corporate clients remaining
contracted throughout the year.
The transition to an online global solution provider has been driven by
several key trends:
· Increased value: Most large corporations now understand there is
substantial added value in proactively managing surplus assets, as it
generates cash, while reducing costs and capital expenditures.
· Need for greater transparency: Changing regulations, including rules
pertaining to the Sarbanes Oxley Act in the USA, have created a need for
improved transparency and accountability for asset sales and asset valuations.
· Greater acceptance of a global outsourced approach: Large manufacturers
increasingly appreciate the cost, control, planning, and reporting advantages
provided by a global, knowledgeable, expert partner.
· Sustainability: Global companies have seen how a well implemented
surplus asset management program can significantly improve their
sustainability results.
The Group's aim is to sign multi-year contracts for the ongoing disposal of a
corporation's surplus assets. Additionally the Group seeks to provide
information and technology tools to facilitate asset redeployment and provide
asset valuation services for reporting and lending purposes. These multi-year
contracts typically result in recurring revenue and generate a significant ROI
for corporate customers through increases in sales and asset productivity and
reduction of capital expenditure. Building these corporate relationships is
also important as they provide the Group with intimate knowledge of potential
large transactions arising from facility closures that typically might not
otherwise be public.
We believe that this strategic progress will in due course result in improved
Group profitability.
Financial performance
The Group delivered Direct Profit of £22.1.m (2010: £27.8m). In particular,
our North American operations were adversely impacted due to a reduced number
of large plant closures and general economic uncertainty in 2011 which caused
many corporations to be exceptionally cautious about investment. The extent of
this caution was unprecedented as was widely reported in the financial press
as 'Corporate America sitting on a massive $2 trillion of cash'. As a
consequence, the Group reported an adjusted EBITDA loss of £2.0m (2010: profit
£1.5m). The adjusted loss before tax was £2.9m (2010: adjusted profit before
tax £0.6m), before charges for amortisation of acquired intangibles of
£0.7m (2010: £0.7m), share based payments of £0.2m (2010: £0.2m), net
financing costs of £0.3m (2010: £0.3m) and exceptional charge of £0.2m (2010:
£0.4m) which relates to the restructuring of the operations to better align
the business with the strategic direction and the costs of securing forward
flow contracts off-set by a net credit on settlement of legal cases. Loss
before tax was £4.0m (2010: £0.7m).
At 31 December 2011 the Group's net debt position (cash and bank less
borrowings and client funds) was £4.2m (2010: net cash £0.5m).
Basic loss per share was 42.5p (2010: 3.7p). Adjusted loss per share for the
year was 31.6p (2010: earnings per share of 9.6p), where the adjustments to
the loss attributable to equity holders of the company are exceptional costs,
amortisation of acquired intangible assets and an IFRS 2 charge for
share-based payments.
Outlook
The Board has been continuing to implement its strategy to position the Group
for growth by signing more large corporate forward flow accounts. The Board
believes that this will bring greater visibility to revenue, and will help
improve both profits and cash flow. The Board also has had an ongoing focus
on efficiency, having reduced costs substantially during the latter part of
2011, whilst continuing to improve business processes. In addition the Board
expected the Group to benefit from improved performance as the investment
climate recovers in North America and momentum within its markets improves.
Whilst the Group is making strategic progress on a number of fronts, it has
yet to see tangible results of this progress in terms of profitability and
market value of the company. The Company has received an offer from Liquidity
Services, Inc. to acquire the issued share capital of the Company at 73pence
per share.After considering the Company's progress, the opportunities that lie
ahead and the resources available to realise such opportunities, the Board
recommends shareholders to vote in favour of a proposed Scheme of Arrangement
which would result in the issued share capital of the Company being acquired
at 73 pence per share in cash by Liquidity Services Inc. Further information
will be sent to Shareholders shortly.
Finally, I would like to thank the staff for their continuing commitment
through a challenging year.
Neville Davis
Non-Executive Chairman
9 May 2012
Business Review
GoIndustry DoveBid is the global market leader in the provision of surplus
asset management, online auction and valuation services for the industrial and
financial marketplaces. We believe there is a strong and growing market
opportunity for our services. We have implemented a strategy that will
leverage our industrial equipment knowledge, our global presence and our
online sales platform to address the equipment valuation, redeployment and
surplus asset disposal needs of corporations.
Business objectives and strategy
GoIndustry DoveBid's key strategy is focused on delivering repeatable revenue
and growing profits for the Group by providing a comprehensive set of services
to assist corporate clients in maximising the value of their industrial
assets. We believe the corporate market will provide a solid environment for
growth and will deliver long term benefits for the Group. This will provide
more recurring revenues than the traditional auction business which is more
transactional in nature. We aim to deliver sustainable profit growth by:
· Expanding our volume of business with existing corporate accounts by
further implementing our unique services and technology across their global
locations;
· Continuing to sign new corporate accounts as we have in 2011, where we
successfully opened both the European and Asian markets to our comprehensive
Go-Optimize^® service offering;
· Continue to leverage our proprietary online auction platform, Industry
Exchanges and AssetZone^® asset management tools to manage our business and
our clients' surplus assets more effectively;
· Continually increasing the effectiveness of our sales and marketing
capabilities to access new buyers across the world and new market
opportunities; and
· Constantly improving the global quality of our services to clients.
The Group has several compelling differentiators upon which to build. Our
exceptional professional knowledge of the used equipment market, combined with
a comprehensive service offering coupled with global coverage, has put the
Group at the forefront of assisting large corporations to pro-actively manage
their surplus industrial assets. Our Go-Optimize^® services suite offers a
complete set of managed services and tools to recover value from used assets
through utilising our:
· AssetZone^® asset management and redeployment tool;
· valuation and appraisal services;
· online global auction capabilities; and
· Industry Exchanges - regularly scheduled online marketplaces for
specific industries, such as the highly successful BioPharma Exchange.
The objective of Go-Optimize^® is to achieve outstanding results for clients
by generating cash from asset sales and cash savings from reduced capital
expenditure, whilst delivering a proactive, structured, transparent and
efficient surplus asset management programme.
Operational highlights
Direct Profit for the Group was down 20.6% to £22.1m (2010: £27.8m). Trading
was particularly weak in North America. This was primarily due to general
economic uncertainty causing many companies to postpone major capital
expenditure decisions and focus on maximising productivity from their existing
capital assets. The economic uncertainty in 2011 made companies reluctant to
buy new assets or dispose of unused ones until there was greater clarity
regarding future needs and trends. Nevertheless, we did see a gradual
improvement in our North American performance in the second half of 2011 which
has continued into 2012.
The trends experienced in North America underline the important rationale
behind our strategic shift of increasing the number of corporate 'forward
flow' agreements with large global companies for the provision of surplus
industrial asset management, auction and valuation services. These
agreements, which typically are multi-year service agreements, deliver
significant recurring revenues and give the Group greater visibility and
scalability over the medium term.
Indeed, the Group continues to make solid progress delivering on this key
strategic aim. It has won 21 new global corporate forward flow accounts in
2011, taking our total number of active forward flow accounts to 60 at the
year end. This has extended our global lead in the corporate surplus
industrial asset management segment. We are also in advanced contract
negotiations with many other multinational companies and look forward to
updating the market on these developments in due course. These agreements
should provide significant additional revenues to the Group in 2012 and in
subsequent years. For example, the top 15 forward flow accounts averaged over
£450k each in Direct Profit during 2011, evidencing strong asset flow despite
fewer large plant closures. It should be noted that many of our new corporate
forward flow clients quickly began using our services and four new accounts
made the Top 15 in 2011. In addition, over 97% of our key corporate contracts
have been renewed in 2011 or remain in effect, demonstrating further evidence
of the customer satisfaction our service delivers. Including non-forward flow
accounts our top three clients delivered more than £900k each in Direct
Profit, demonstrating the quantum of the opportunity for the Group to
penetrate the market. The Group continued its investment in growing its
delivery capabilities, such as the Go-Optimize^® services suite, which helps
large corporations pro-actively manage their surplus assets. We believe it
will be an important contributor to future growth and it continues to be well
received in the market.
Whilst we are making strong progress in pursuing our strategic objectives this
is yet to be reflected in an upturn in our financial performance.
Overview of the Group's financial performance
In the year ended 31 December 2011, Direct Profit was generated as follows:
2011 2010 Change
£m £m
Commission sales 16.6 20.8 (20.1%)
Professional services 4.4 4.2 5.0%
Principal deals 1.1 2.8 (61.8%)
22.1 27.8 (20.5%)
The Direct Profit from Commission Sales from auction transactions accounted
for 75% (2010: 75%) of total Direct Profit. The proportion of sales conducted
online remained robust increasing to 71% from 70% in 2010. This was in part
due to the growing popularity of the Group's Industry Exchanges, which are
becoming a recurring destination site for buyers and sellers of used
equipment. Our online sales are a strong endorsement for showing that
corporations are embracing the transparent and efficient online method for
obtaining the best value for resale equipment.
Professional services, comprised primarily of valuation fees, accounted for
20% of total Direct Profit up from 15% in 2010, based mostly on increased
business with large global financial services clients.
Other Direct Profit, comprised primarily of principal deals, declined from 10%
to 5%. These deals are no longer regarded as a core activity as they increase
the Group's exposure to financing commitments and fluctuations in asset
values.
As explained above, North America had a disappointing year with Direct Profit
down £5.0m on 2010 to £10.6m. A key factor was the reduction of Direct Profit
from Principal deals, down £1.6m to £1.0m. Commission Sales in North America
experienced weakness and were down £2.9m to £8.0m as corporations had fewer
plant closures than in 2010 and deferred major capital expenditure decisions.
Professional Services, decreased by £0.4m to £1.6m. As a consequence, North
America accounted for 48% of the Group Direct Profit, down from 56% in 2010.
Europe delivered a Direct Profit of £8.7m, down 6% on 2010. In particular,
Professional Services had a strong year with Direct Profit up 25.5% to £2.3m
mostly due to greater demand in the UK. Commission Sales were £6.4m, down
12.5% on 2010, following the postponement of a number of major auctions.
However, improvements in the overall mix of business led to a significant
increase in the European margin up from 63% in 2010 to 74% in 2011.
Direct Profit in Asia was £2.8m, 3.7% below last year. Despite a large
contract in Korea to close 3 factories in the first half, Direct Profit from
Commissions Sales was £2.2m, down £0.3m, due to delays of expected plant
closures in the second half. Professional Services grew by 25% from £0.4m to
£0.5m principally driven by companies requiring asset valuations due to
restructuring, liquidations and mergers. Other Direct Profit was £0.1m (2010:
£0.1m)
The Group derives more than half of its revenues in US dollars, so movements
in the Sterling-US Dollar rate affect our reported revenues. Although the US
dollar finished 2011 only one tenth of a cent stronger against Sterling than
it began the year, for most of 2011 it was weaker against Sterling, at one
stage it was more than 8% down, so that the impact of exchange rates, although
not significant, has tended to lower the reported revenues.
The Group continues to monitor its cash flow requirements and at 31 December
2011 the Group's net debt position was £4.2m (2010: net cash £0.5m). The main
increase in net debt is due in part to funding the trading activity, an
increase in net working capital of £2.8m (of which the reduction in amounts
due to clients was £3.0m), payments to the defined benefit pension scheme of
£0.75m and capital expenditure of £0.7m.
In May 2012, the Group agreed to a renewal of its main banking facilities.
The maturity date of the $2.4m term loan was altered to July 2013. Each of
the Working Capital and Principal Deal facilities were extended until April
2013, with the Working Capital facility being reduced by quarterly repayments
of $0.25m, and the Principal Deal facility being decreased from $5.5m to
$2.5m. At December 2011 the combined headroom on the above facilities was
£4.3m, which is sufficient for our present requirements.
During 2011 the Group undertook a reorganisation to better align the
operations with the strategic focus of acquiring and servicing Corporate
Forward Flow accounts. As a consequence, adjusted Administration costs were
down £2.2m to £24.7m, primarily due to lower staffing levels, lower sales
commissions and continued cost controls across the Group.
The combined effect of Direct Profit decreasing by £5.7m and Administration
costs decreasing by £2.2m resulted in adjusted EBITDA loss of £2.0m compared
to an adjusted EBITDA profit of £1.5m in 2010.
The adjusted Loss before Tax was £2.9m, compared to a adjusted Profit before
Tax of £0.6m in 2010.
Reported Loss before Tax was £4.0m compared to a loss before tax of £0.7m in
2010, reflecting exceptional costs of £0.2m (2010: £0.4m), amortisation of
acquired intangibles of £0.7m (2010: £0.7m) and share based payment charges of
£0.2m (2010: £0.2m).
Exceptional costs
During the year the Group incurred exceptional costs of £0.2m which related to
headcount reduction, the restructuring of the business to align operations
with the Group's overall strategic direction off-set by a net credit on
settlement of legal cases and costs associated with securing forward flow
contracts. The objective of the restructuring is to make the Group more
efficient for both management and administrative purposes. In 2010 the Group
incurred exceptional costs of £0.4m mainly due to the changes to the Board and
the restructuring of the legal entities within North American.
Taxation
In 2010 the Group recognised deferred tax assets arising from tax losses in
the United Kingdom and North America. Other countries do not warrant
recognition of a deferred tax asset as yet, but the Group regularly reviews
this situation.
Earnings per share
Adjusted basic loss per share was 31.6p against an adjusted earnings per share
of 9.6p in 2010.
Basic loss per share was 42.5p (2010: loss 3.7p). Earnings and Adjusted
earnings per share are calculated on the weighted average number of Ordinary
Shares in issue of 9,798,494 for the year ended 31 December 2011 (2010:
9,790,481 Ordinary Shares).
Balance sheet and net cash
At 31 December 2011 the Group had a net debt position, after borrowings, of
£4.2m (2010 Net cash: £0.5m). The Group ended the year with bank borrowings
of £5.0m (2010: £2.2m) drawn against total bank facilities of £9.3m. Other
borrowings comprised convertible loan notes of £0.5m (2010: £0.5m). Since the
end of the financial year the Group has renewed its main bank facilities for
another year.
Treasury policy
Treasury policies are approved by the Board, and the Executive Directors have
the delegated authority to approve financial transactions within agreed terms
of reference. The Group's financial instruments are principally comprised of
bank borrowings, cash, and various other items that arise directly from
trading operations. The cash includes significant amounts of client cash held
in the normal course of conducting sales. The main purpose of these financial
instruments is to ensure that finance is available for the Group's
operations. The main risks arising from the Group's financial instruments are
interest rate risk, credit risk, liquidity risk and foreign currency risk.
The Board reviews and agrees policies for managing each of these risks and
they are summarised below. These policies are unchanged from the previous
year.
a) Interest rate risk
The Group finances its operations through a mixture of retained profits,
operational cashflow and bank and subordinated debt. Historically the Group
has expanded its operations both organically and by acquisition which has led
to the need for external finance. For borrowings dominated in US dollars, the
Board has chosen a credit facility with a floating rate of interest linked to
LIBOR with a margin of 3.25%, and for borrowings dominated in Sterling the
interest rate is 2.5% over base rate.
b) Liquidity risk
The Group's policy throughout the year has been to ensure continuity of
funding by the use of term loan facilities of US$3.85m and £0.3m, and
convertible loan notes of £0.5m. There are also revolving credit facilities
for Principal Deals and Working Capital of US$5.5m each. The maturity date
for the US Term Loan is 31 July 2013, the maturity date for the GBP Term Loan
30 June 2012. A renewal of both the Working Capital and Principal Deal
Facilities has been agreed to 30 April 2013. The Working Capital Facility
will be reduced by quarterly repayments of US$0.25m to US$4.5m, starting 31
July 2012, and the Principal Deal Facility will be reduced from US$5.5m to
US$2.5m.
c) Foreign currency risk
The Group has a substantial overseas customer base and maintains bank accounts
in foreign currencies. These currencies are converted to Sterling at the
appropriate times minimising the exposure to exchange rate fluctuations.
Key Financial and Operational Targets
At a Group level there are a number of key financial and operational targets.
In addition, each of the operating divisions monitors a number of key
performance indicators. In the first quarter of 2011 the Group's performance
was seriously impacted by the global recession. However, during 2011, the
Group has been concentrated on mitigating the adverse effects of the global
recession, whilst at the same time, establishing a more resilient and
efficient platform to support future growth.
Revenue measures
Gross asset sales ("GAS") for 2011 was £107.7m (2010: £145.6m), which
represents the level of activity handled by the operations and measures the
sum of the proceeds of all assets sold at auction or in a negotiated sale.
Direct Profit, which represents gross profit before administrative expenses is
the key operating metric that is used for measuring levels of business
activity and growth in each business unit. Direct Profit is used rather than
Revenue as reported on the Consolidated Statement of Comprehensive Income,
because Revenue can be skewed from one year to the next depending on the
volume of Principal Deals undertaken. In each of the three revenue streams,
Direct Profit is measured as follows:
· Commission Sales - GoIndustry DoveBid acts as an agent and sells
equipment on behalf of a seller. Direct Profit represents the sum of the
buyer's premium, seller's commission and expenses billed to the seller, less
the cost of expenses incurred and any commissions paid to third parties.
· Professional Services - GoIndustry DoveBid provides Professional
Services (such as appraisals and valuations) to its clients. Direct Profit
represents the professional fees and expenses billed, less expenses incurred,
and any commissions paid to third parties.
· Principal Deals - GoIndustry DoveBid acts as principal, either
purchasing the equipment for sale outright or guaranteeing a minimum price to
the seller. In the event of a Purchase Deal, Direct Profit represents the sum
of GAS achieved and buyer's premium, less the cost of the assets purchased,
expenses incurred and any commissions paid to third parties. In the event of
a Guarantee Deal, Direct Profit represents the sum of GAS achieved and buyer's
premium, less the guaranteed value of the assets, the seller's share of any
upside realised above the guarantee, expenses incurred and any commissions
paid to third parties. In both cases, should GAS fall below the purchase or
guarantee amount, then it will be deducted from the buyer's premium; if GAS is
significantly lower, a loss is recorded against Direct Profit.
Adjusted Profit before Tax
This measure indicates the trading profits of the Group, after bank and
interest charges, but before amortisation and impairment of acquired
intangible assets and goodwill, exceptional items, and share based payments.
In the year ended 31 December 2011, Adjusted Loss before Tax was £2.9m (2010:
Profit £0.6m).
Adjusted earnings per share
This key measure indicates the underlying profit attributable to
shareholders. It measures not only trading performance, but also the impact
of treasury management, bank and interest charges. Our business and financial
strategy is directed at delivering consistent Adjusted Earnings Per Share
growth. In the year ended 31 December 2011, Adjusted Basic Loss Per Share was
31.6p per share (2010: Adjusted Basic Earnings Per Share 9.6p).
Consistent and Sustainable Revenue Streams
The strategy to provide a range of managed services solutions has allowed the
Group to focus on the global corporate market. This push towards more robust
and sustainable revenue streams has resulted in a strong portfolio of
offerings, which includes:
· professional disposal and related services to enable corporate bodies
to realise the value of redundant assets specialist professional valuation and
appraisal services;
· AssetZone^® - proprietary web-based portal for managing corporate
assets;
· Industry Exchanges - providing recurring online B2B global market
places.
The Group continued to improve its online product and service offering, with
enhancements to the website which included improved payment mechanisms and
customer experiences. The Group has also invested in the improvement of its
operating systems and online services, so as to deliver ongoing benefits.
Adjusted operating margin
Improving and maintaining the Adjusted Operating Margin (as a percentage of
Direct Profit) is a key goal for the Group. The decline in Direct Profit
experienced in 2011 compared to 2010 of 20.6% to £22.1m, resulted in the Group
reporting an adjusted operating loss of £2.6m (2010: profit £ 0.9m).
Principal risks
The main risks, which affect the Group as a whole, include the following:
· GoIndustry DoveBid operates in a market where many deals are awarded on
an individual basis. Although the strength of customer relationships often
mean deals are awarded to the Group on a regular basis, there are few
guaranteed revenue streams and it can be difficult to forecast the business
results more than 3 - 6 months into the future. The strategy to provide a
range of managed solutions to global corporate clients is designed to reduce
this risk and to increase visibility over future revenue streams;
· The impact of major auction sales can be significant on the Group's
results, although the regularly scheduled Industry Exchange auctions, which
are mainly sourced from Corporate Forward Flow clients, help to mitigate this
risk;
· When the Group takes a principal position in assets that are being
offered for sale, either by buying directly from the seller or by guaranteeing
a minimum sale price to the seller, the Group will then sell those assets on
its own account and recognise the full financial impact from that
transaction. This represents an additional risk for the Group in return for
the expectation of a higher profit. GoIndustry DoveBid's ability to bid for
and win Principal Deals is predicated on continued access to credit
facilities. In order to control the risks and protect the Group from downside
exposure, all principal transactions require the approval of the Investment
Committee, which is made up of both equipment experts from across the Group
and business professionals;
· The expertise of our valuers and appraisers is critical to the success
of the Group when assessing whether to take a principal position. Our
knowledge of the assets and the global markets for disposing of those assets
is a key resource, as is our global valuation database;
· One of the Group's key competitive advantages is its database of
potential buyers located in over 200 countries. Guidelines and regulations
about marketing practices and data protection laws vary from country to
country and may change. Substantial changes may prohibit us from direct
marketing or increase the risk of lawsuits;
· There are a number of other organisations that offer similar services
to those of GoIndustry DoveBid. Such organisations may be better funded or
operate with a lower cost base than GoIndustry DoveBid. Aggressive competition
from such organisations could have a negative impact on the financial
performance of the Group;
· GoIndustry DoveBid is a people based business. Failure to attract or
retain key employees could seriously impede future growth. To ensure staff
retention the Group operates competitive remuneration packages for key
individuals. The retention and motivation of key personnel is fundamental in
the future success of GoIndustry, as is the ability to recruit new personnel
to support future growth;
· GoIndustry DoveBid's business is increasingly dependent on IT
infrastructure, electronic platforms and the internet for delivery of its
services. Any downtime can disrupt sales and undermine buyer confidence.
Short-term service interruptions may affect sales realisations on individual
jobs, whilst long-term service interruptions would materially affect the
financial results of the Group. Whilst our businesses could be adversely
affected from such disruption, the Group is sufficiently diversified to
minimise such impact. During the year under review the Group has continued to
invest in new systems and electronic platforms with greater protection against
failure;
· The success of the Group's businesses is in part dependent on the
success of its branded services. Damage to reputation and/or brand could lead
to an adverse impact on the Group. GoIndustry DoveBid is conscious of the
need to ensure the careful management of services to reduce this risk; and
· GoIndustry DoveBid is operating in an international environment. While
this provides growth in new territories, it comes coupled with risks in terms
of cultural and political conditions, foreign laws and legislations, tax
changes, currency fluctuations, language barriers, and differing regulatory
requirements. GoIndustry DoveBid engages with local professionals to seek
advice, as appropriate, in the countries in which we operate.
· GoIndustry DoveBid operates in many geographical areas where our
services are impacted by local economic factors which can have an adverse
impact on our ability to achieve projected results and therefore the growth
targets set. The budgets set by the Board support the carrying value of
goodwill and therefore there is a risk that a shortfall in budgeted trading
results may impact the carrying value of this goodwill.
Future developments
The shifting of industrial production from developed western economies to
China, India and the emerging economies of Eastern Europe is set to continue
for many years. With its operations in Asia Pacific (APAC), the Group is well
placed to benefit from this shift.
Growing acceptance of the internet as a medium for transacting business around
the world will also play a significant part in the future growth of the Group,
and the Group's regularly scheduled Industry Exchange auctions are a key
engine for future growth and improved visibility of earnings.
Consolidated Income Statement
Year ended 31 December 2011 Year ended 31 December 2010
Before Before
exceptional Other exceptional Other
items and Exceptional charges items and Exceptional charges
other items (note other items (note
charges (note 5) 6) Total charges (note 5) 6) Total
£000's £000's £000's £000's £000's £000's £000's £000's
Revenue 33,465 - - 33,465 40,094 - - 40,094
Cost of sales (11,370) - - (11,370) (12,283) - - (12,283)
Direct profit 22,095 - - 22,095 27,811 - - 27,811
Administrative (24,735) (224) (837) (25,796) (26,926) (409) (893) (28,228)
expenses
Operating (2,640) (224) (837) (3,701) 885 (409) (893) (417)
(loss)/profit
Finance costs
Finance income 41 - - 41 82 - - 82
Finance expense (334) - - (334) (354) - - (354)
Net finance (293) - - (293) (272) - - (272)
expense
(Loss)/profit
before income (2,933) (224) (837) (3,994) 613 (409) (893) (689)
tax
Income tax (168) - - (168) 227 - - 227
Loss for the (4,162) (462)
year
Loss
attributable
to:
Equity holders (4,161) (359)
of the Company
Non-controlling (1) (103)
interests
(4,162) (462)
Revenue and operating (loss)/profit are derived from the Group's continuing operations.
Loss per share attributable to equity holders of the Company during the year
(expressed in
pence per
share) Note 2011 2010
Basic 8 (42.5p) (3.7p)
Diluted 8 (42.5p) (3.7p)
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2011
2011 2010
£000's £000's
Loss for the year (4,162) (462)
Other comprehensive income:
Exchange losses on translation of foreign subsidiaries (225) (235)
Actuarial (losses) / gains on defined benefit pension scheme (42) 687
Other comprehensive income for the year, net of tax (267) 452
Total comprehensive income for the year (4,429) (10)
Total comprehensive income attributable to:
Equity holders of the Company (4,428) 93
Non-controlling interests (1) (103)
(4,429) (10)
The tax effect on other comprehensive income is £nil (2010: £nil)
Consolidated Statement of Financial Position
Note 2011 2010
£000's £000's
Non-current assets
Property, plant and equipment 333 350
Intangible assets 31,442 32,178
Deferred tax asset 327 327
32,102 32,855
Current assets
Inventories 465 334
Trade and other receivables 4,936 5,515
Cash and cash equivalents 10,543 15,920
15,944 21,769
Total assets 48,046 54,624
Current liabilities
Trade and other payables 17,519 21,422
Borrowings 9 3,754 2,053
21,273 23,475
Non-current liabilities
Trade and other payables - 10
Borrowings 9 1,784 1,162
Retirement benefit obligations 2,854 3,358
4,638 4,530
Total liabilities 25,911 28,005
Net assets 22,135 26,619
Equity
Share capital 98 98
Share premium 22,983 22,983
Capital redemption reserve 28,609 28,609
Other reserves 54,209 54,278
Accumulated losses (83,711) (79,508)
Equity attributable to equity holders of 22,188 26,460
the Company
Non-controlling interests (53) 159
Total equity 22,135 26,619
Jack Reinelt Leslie-Ann Reed
Chief Executive Officer Chief Financial Officer
9 May 2012 9 May 2012
Consolidated Statement of Changes in Equity
Attributable to equity holders of the company
Share capital Share premium Capital redemption reserve Shares to be issued Acquisition reserve Share options reserve Foreign currency reserve Accumulated losses TOTAL Non-controlling interest TOTAL Equity
£000's £000's £000's £000's £000's £000's £000's £000's £000's £000's £000's
At 1 January
2010 9,745 22,495 18,908 542 47,649 1,572 5,106 (79,836) 26,181 262 26,443
Comprehensive
income:
Loss for the (359) (359) (103) (462)
year - - - - - - -
Other
comprehensive
income:
Actuarial gains
on defined 687 687 687
benefit pension - - - - - - - -
scheme
Exchange losses
on translation (235) (235) (235)
of foreign - - - - - - - -
subsidiaries
Total
comprehensive - - - - - - (235) 328 93 (103) (10)
income
Transactions
with owners:
Issue of
deferred share 54 488 - (542) - - - - - - -
consideration
Cancellation of
redeemable (9,701) 9,701
deferred shares - - - - - - - - -
held
Share based 186 186 186
payments - - - - - - - -
Total
transactions (9,647) 488 9,701 (542) - 186 - - 186 - 186
with owners
At 1 January 98 22,983 28,609 47,649 1,758 4,871 (79,508) 26,460 159 26,619
2011 -
Comprehensive
income:
Loss for the - - - - - - - (4,161) (4,161) (1) (4,162)
year
Other
comprehensive
income:
Actuarial loss
on defined - - - - - - - (42) (42) - (42)
benefit pension
scheme
Exchange losses
on translation - - - - - - (225) (225) - (225)
of foreign
subsidiaries
Total
comprehensive - - - - - - (225) (4,203) (4,428) (1) (4,429)
income
Transactions
with owners:
Share based - - - - - 156 - - 156 - 156
payments
Disposal of
non-controlling - - - - - - - - (211) (211)
interest
Total
transactions - - - - - 156 - - 156 (211) (55)
with owners
At 31 December 98 22,983 28,609 - 47,649 1,914 4,646 (83,711) 22,188 (53) 22,135
2011
Consolidated cash flow statement
For the year ended 31 December 2011
For the year ended 31 December
Note 2011 2010
£'000 £'000
Cash flows from operating activities
Cash used in operations (6,409) (3,550)
Interest paid (388) (354)
Income tax paid (178) (31)
Interest received 60 82
Net cash used in operating activities (6,915) (3,853)
Cash flows from investing activities
Purchases of property, plant and equipment (203) (64)
Proceeds from disposal of subsidiary 132 -
Proceeds from sale of property, plant and 44 542
equipment
Purchases of intangible assets (498) (615)
Net cash used in investing activities (525) (137)
Cash flows from financing activities
Repayments of Loan Notes (466) (28)
Drawdowns on bank loans 1,197 300
Repayments of bank loans (609) (413)
Increase/(decrease) in other banking 2,201 (1,009)
facilities
Net cash generated by/(used in) financing 2,323 (1,150)
activities
Net decrease in cash and cash equivalents (5,117) (5,140)
Cash and cash equivalents at beginning of 15,920 20,751
year
Effect of foreign exchange rate changes (260) 309
Cash and cash equivalents at end of year 10,543 15,920
Notes to the condensed consolidated financial statements
1. General information
GoIndustry-DoveBid plc ('the company') and its subsidiaries (together 'the
Group') is a global market leader in the service, management, and disposal of
surplus industrial assets. The Group has offices in locations across Europe,
North America, and Asia.
The company is a public limited company, which is listed on the AIM Market of
the London Stock Exchange and incorporated and domiciled in the United
Kingdom. The address of its registered office is St. Andrew's House, 18-20 St.
Andrew Street, London, EC4A 3AG.
2. Basis of preparation
The financial information contained in this document does not constitute
statutory accounts within the meaning of section 434 of the Companies Act
2006. The figures for the year ended 31 December 2011 have been extracted from
the audited financial statements for the year ended 31 December 2011, which
have been prepared in compliance with International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB)
and with the standing interpretations issued by the International Financial
Reporting Interpretations Committee of the IASB. Those financial statements
have yet to be filed with the Registrar of Companies and received an
unqualified audit report which did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The figures for the year ended 31 December 2010 have been extracted from the
audited statutory accounts for that year which have been filed with the
Registrar of Companies and received an unqualified auditor's report which did
not contain a statement under section 498 (2) or (3) of the Companies Act
2006.
3. Accounting policies
The condensed financial statements have been prepared under the historical
cost convention.
Going Concern
The Board remains satisfied with the Group's funding and liquidity position.
The main sources of debt funding are the bank facilities with Barclays Bank
plc in the United Kingdom, PNC Bank in the United States and the convertible
loan notes.
The Group meets its day-to-day working capital requirements from its cash and
overdraft facilities. As at 31 December 2011, the Group had drawn down US$3.6m
on the US$5.5m working capital facility, and had drawn down US$0.9m on the
revolving credit facility for Principal Deals of US$5.5m. The US$3.85m term
loan facility had a balance of US$3.2m outstanding at 31 December 2011. The
amounts outstanding on these facilities at 30 April 2012 were US$5.5m on the
working capital facility, US$2.2m on the facility for Principal Deals, and
US$2.7m on the term loan.
PNC have extended the bank facilities for a further 12 months with revised
terms. The Working Capital Facility of US$5.5m will be reduced to US$4.5m by
30 April 2013 by the repayment of US$250k every three months starting 31 July
2012. Given the low usage of the Principal Deal line, we have agreed a
reduction in this facility to US$2.5m from US$5.5m which has been extended to
30 April 2013. The Term Loan will mature on 31 July 2013, with monthly
repayments of US$100k as before but with the remaining balance of US$1.3m
being paid in a lump sum on 31 July 2013. The covenant terms are also being
revised and the Board are currently agreeing these new terms with PNC bank.
The Group also has a term loan facility with Barclays Bank plc of £0.3m with a
balance of £0.1m outstanding at 31 December 2011. This will be fully repaid by
June 2012.
In addition to the above bank facilities, the Group operates with a
significant amount of operational cash, which is generated from the gross
asset sales made during the course of business. The amount of operational cash
at 31 December 2011 was £9.2m. This operational cash is held in separate bank
accounts, and is used in the ordinary course of business to pay amounts due to
clients. The Group has always had the ability to use this operational cash as
part of its working capital, should the need so arise, and the Board remains
confident that the value of operational cash is sufficient to ensure the going
concern status of the Group.
In considering the going concern position of the Group, the Board has applied
reasonable sensitivities, which if realised would require the company to draw
upon the operational cash to support the going concern position of the Group.
Furthermore, the Board is cognisant that the revised covenant terms are
currently being agreed with PNC, which will be based on the Group's
projections and with a minimum EBITDA requirement. In the event that the Group
were subsequently to breach any of the covenant terms, the Board has
considered what the level of exposure on bank facilities would be and are
satisfied that the Group would be able to draw upon the operational cash to
settle the liabilities, if required to do so. All other debt funding is free
of covenants. For the reasons set out above, the Board anticipates that should
the recently announced transaction not complete, sufficient funding is in
place to ensure the Group continues as a going concern for the foreseeable
future.
Other than as noted above, the same accounting policies, presentation and
methods of computation has been followed in these condensed financial
statements as were applied in the preparation of the Group's financial
statements for the year ended 31 December 2010.
4. Segmental analysis
Management has determined the operating segments based on the reports reviewed
by the Group Board, acting as the strategic steering committee that is used to
make strategic decisions.
The Board considers the business both from a geographic and from a services
perspective. Geographically, management considers the performance in Europe,
North America and Asia Pacific ("APAC").
The reportable operating segments derive their revenue from commissions
arising from auctions and private treaty sales, fees from valuations and other
professional services and from sales, commissions and billable expenses
arising from principal deals, of both buy and guarantee types.
The performance of the operating segments is measured both at Direct Profit
(gross profit) and Operating profit levels.
(a) Geographical analysis
2011
Europe North America APAC Corporate Consolidated
£000's £000's £000's £000's £000's
Revenue 11,735 17,948 3,782 - 33,465
Direct profit 8,664 10,565 2,866 - 22,095
Segment result 330 179 102 (3,251) (2,640)
Exceptional items 343 (566) (1) - (224)
Other charges (78) (605) (20) (134) (837)
Operating profit/(loss) 595 (992) 81 (3,385) (3,701)
Net finance expense (2) (225) 7 (73) (293)
Profit/(loss) before income 593 (1,217) 88 (3,458) (3,994)
tax
Income tax (18) (9) (141) - (168)
Profit/(loss) for the year 575 (1,226) (53) (3,458) (4,162)
Depreciation and 99 669 70 519 1,357
amortisation
Total assets 14,455 23,344 8,064 2,183 48,046
Total liabilities 9,988 13,648 1,187 1,088 25,911
Capital expenditure:
Property, plant and 90 35 27 13 165
equipment
Intangible assets 131 - - 367 498
(b) Revenue stream analysis
2011 2010
£000's £000's
Revenue
Commission Sales 22,656 29,874
Professional Services 4,896 4,746
Principal Deals 5,913 5,474
Total 33,465 40,094
Direct profit
Commission Sales 16,624 20,812
Professional Services 4,396 4,186
Principal Deals 1,075 2,813
Total 22,095 27,811
(c) Revenue from external customers
2011 2010
£000's £000's
Entity's country of domicile - United Kingdom 8,444 8,379
Foreign countries from which the Group derives revenue
USA 17,948 21,534
Germany 2,933 6,034
Other Europe 358 236
APAC 3,782 3,911
Total 33,465 40,094
(d) Non-current assets
2011 2010
£000's £000's
Located in the entity's country of domicile - United Kingdom 4,259 14,792
Foreign countries from which the Group holds assets
USA 15,565 6,593
Germany 591 9,360
Other Europe 5,960 1,958
APAC 5,727 152
Total 32,102 32,855
5. Exceptional costs
2011 2010
£000's £000's
Reorganisation costs 667 91
Board change costs - 200
Legacy costs associated with legal cases (570) 118
Costs Associated with securing forward flow contracts 127 -
Total 224 409
Exceptional costs do not arise from the normal course of business.
Reorganisation costs arise from the restructuring of the North American and
European businesses following headcount reductions as part of efficiency
savings (2010: restructuring of North American legal structure).
The credit in 2011 for legacy costs results from the release of a provision no
longer required following the settlement of a long-standing legal dispute.
6. Other Charges
2011 2010
£000's £000's
Equity settled share based payments 156 186
Amortisation of customer relationships and brand acquired 681 707
Total 837 893
7. Income tax expense
2011 2010
£000's £000's
Current tax:
Overseas corporation tax charge/(credit) on profits in the 168 (227)
year
168 (227)
2011 2010
£000's £000's
(3,994) (689)
Loss before income tax
Tax at the UK corporation tax rate of 26.5% (2010: 28%) (1,059) (193)
Effect of lower income tax rate of other countries (83) 53
Deferred tax not recognised 1,005 1,056
Tax losses not utilised - (1,466)
Unprovided tax losses now utilised 127 -
Share based payments expense not deductible 44 52
Expenditure not allowable for income tax purposes 134 271
168 (227)
8. Earnings per share
2011 2010
£000's £000's
Loss for the year attributable to equity holders of the Company (4,161) (359)
Number Number
000's 000's
Weighted average number of ordinary shares in issue 9,798 9,790
Basic and diluted loss - pence per share (42.5p) (3.7p)
£000's £000's
Loss for the year attributable to equity holders of the Company (4,161) (359)
Add back:
Exceptional items (note 5) 224 409
Other charges (note 6) 837 893
Adjusted (loss)/earnings attributable to equity holders of the (3,100) 943
Company
Weighted average number of ordinary shares in issue 9,798 9,790
Adjusted basic (loss)/earnings - pence per share (31.6p) 9.6p
Number Number
000's 000's
Weighted average number of ordinary shares in issue 9,798 9,790
Dilutive effect of share options n/a 56
Weighted average number of ordinary shares for diluted earnings 9,798 9,846
per share
Adjusted diluted (loss)/earnings - pence per share (31.6p) 9.6p
Potentially dilutive shares include 178,570 ordinary shares from convertible
loan notes (31 December 2010: 178,570) and 495,102 ordinary share options (31
December 2010: 556,235). As there is a loss (and an adjusted loss) for the
year, there are no dilutive ordinary shares.
2011 2010
£000's £000's
Current
Bank loans and overdrafts 3,754 1,087
Convertible loan notes - 500
Subordinated loan notes - 466
Total 3,754 2,053
Non-current
Bank loans and overdrafts 1,284 1,162
Convertible loan notes 500 -
Total 1,784 1,162
9. Borrowings
2011 2010
£000's £000's
Floating rate:
Expiring within one year 3,754 1,087
Expiring beyond one year 1,284 -
Fixed rate:
Expiring within one year - 966
Expiring beyond one year 500 1,162
Total 5,538 3,215
The fair value of current and non-current borrowings is not materially
different to their carrying amount, as the impact of discounting is not
significant.
Of the bank loans totalling £5.0m, £2.9m relates to loans used to fund
principal transactions and working capital which are secured by charges over
the assets of those companies and a parent company guarantee from
GoIndustry-DoveBid plc. Subsequent to year-end it was agreed to renew these
facilities until 30 April 2013. There is also a term loan facility of £2.1m
that is due to mature on 31 July 2013. These US loans have a floating interest
rate of 3.25% above LIBOR.
An additional loan held of £0.1m is repayable on demand, bears interest at a
floating rate of 2.5% above UK Base Rates and is secured by a guarantee over
the assets of GoIndustry (UK) Limited.
The convertible loan notes issued by GoIndustry-DoveBid plc were due to mature
at 31 December 2011. During the year the terms were renegotiated and the notes
now mature on 30 June 2014 and bear interest at 12% per annum. The notes are
convertible at any time into 1p New Ordinary shares at a price of £2.80 per
share but they may also be redeemed at any time by the Company upon payment of
120% of their face value. If the company were to be sold the loan notes would
be redeemed at 130% of their face value.
10. Net cash flow from operating activities
For the year ended 31 December 2011
2011 2010
£'000's £'000's
Loss before income tax (3,994) (689)
Adjustments for:
Depreciation 188 256
Amortisation 1,169 1,097
Gain on disposal of property, plant and equipment (19) (53)
Release of provision for legacy legal costs (707)
Share based payments 156 186
Net retirement benefit cost 72 169
Net finance expense 293 272
Pension contributions by the Company (750) (850)
Changes in working capital:
(Increase)/decrease in inventories (130) 284
(Increase)/decrease in trade and other receivables 244 980
Decrease in trade and other payables (2,931) (5,202)
Cash used in operations (6,409) (3,550)
Contacts
Jack Reinelt GoIndustry-DoveBid plc Tel: 020 7098 3700
Leslie-Ann Reed GoIndustry-DoveBid plc Tel: 020 7098 3700
Chris Fielding WH Ireland Ltd Tel: 020 7220 1650
(Nominated Adviser)
Felicity Edwards St Brides Media & Finance Ltd Tel: 020 7236 1177
**ENDS**
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCKMGGKGLZGZZM -0- May/09/2012 11:00 GMT
Sponsored Links
Advertisement
Advertisements
Sponsored Links
Advertisement
Rate this Page